Intellectual property rights, IPR
Example of feedback to a IPR clause from a buyers perspective.
What are Intellectual Property Rights?
Intellectual Property Rights (IPR) are the enforceable rights to the creative work one has produced, and these rights are often protected by the law. Once these rights are applied for and registered, the holder will have exclusive control over these produced assets for a specific period of time. Intellectual property rights can cover a wide range of intangible properties such as:
Artistic and creative work
Information in the form of trade secrets and confidential information
They are used to prevent other from copying businesses trademark distinguishing features - such as name, logos, or other key features - and thus diminish their competitive edge. Besides, Intellectual property rights are also typically used to protect trade secrets and confidential information, for example, in non-disclosure agreements. Hence, it is central that you understand the IPR when reviewing a contract.
These rights are often categorised in the following:
Copyright, used to protect music, films, source code, and other creations. Generally, the copyright applies for 70 years after the death of the holder.
Patents are another type of intellectual property right that protects inventions or technical solutions to problems from being used or sold by others than the creator. Patent applications are often published 18 months after the earliest priority date of the application and apply for a maximum of 20 years.
Design property right, another type of IPR, protects the appearance and shape of a product, but does not prevent others from the use of its function or the overarching idea. This right applies for a maximum of 25 years.
Trademark protection rights are often used to protect the symbol, product, or service of a company. To be covered by trademark protection, the asset must be considered unique and distinguishable from other products or services.
Why are IPRs important?
Intellectual property protection is extremely important to the protection of ideas, businesses, and creative work as these rights allow for innovation to occur. Without these rights, creators and inventors would not receive the full benefits of their work, which could potentially hurt the flow of innovation and creativity.
It is widely recognised that IPRs contribute to domestic and international economics as many different industries heavily rely on the protection and enforcement of patents, copyrights, and trademarks. For this reason, within contracts, intellectual property clauses will be found in most agreements but in different variations. When reviewing a contract these clauses will typically outline that each party retains ownership over their intellectual property unless stated otherwise.
The intellectual property clause is particularly relevant in licensing agreements as it will typically need to explicitly state that the only rights that are transferred are those that are expressly mentioned in the agreement. This means that a license is not a transfer or sale, and it does not affect the ownership of the asset. As a result, the licensee does not own the intellectual property that has been licensed. In the event of any modifications to the licensed intellectual property, the modifications or improvements made will all belong to the licensor in these instances, unless negotiated otherwise. These modifications will potentially be a contentious issue during negotiations as these points will typically vary from contract to contract.
Why should IPR be protected?
IPRs are crucial to keeping your competitors from using your ideas for their own profits without your consent. Thus, Intellectual property needs to be protected by the law to, first, prevent the theft of ideas and offerings. Inadequately protection provided for your intellectual property by, for example, not formulating your rights clearly enough, could lead to expensive and lengthy disputes that can be financially devastating for small business.
Intellectual Property Rights sample clause
When crafting your intellectual property clauses, you should keep in mind the importance of expressly clarifying the extent to which your intellectual property is protected and set clear boundaries and guidelines during the negotiation. This also means that the clauses should not be too limited to how specific the protections are outlined. By doing this, you can prevent infringements and bolster possible claims in the event of a future dispute.
Another aspect that should be considered is that all relevant types of intellectual property such as trade secrets, data, or confidential information should be included within the clause. A provision that covers all forms of relevant intellectual property will ensure that your business ideas are appropriately protected, and future claims can be backed up. When you receive a contract draft, review this carefully.
Your intellectual property clause should convey certainty in the writing in order to protect all your information and products. This must be done with clear and unambiguous writing relating to which protections to seek to claim. An example intellectual property clause is listed below.
Intellectual Property Ownership
X alone (and its licensors, where applicable) shall own all right, title and interest, including all related Intellectual Property Rights, in and to the X Technology, the Content and the Service and any suggestions, ideas, enhancement requests, feedback, recommendations or other information provided by you or any other party relating to the Service. This Agreement is not a sale and does not convey to you any rights of ownership in or related to the Service, the X Technology or the Intellectual Property Rights owned by X. The X name, the X logo, and the product names associated with the Service are trademarks of X or third parties, and no right or license is granted to use them.
Are IPR disputes arbitrable?
Since intellectual property rights may be governed in varying ways and depending on the law and jurisdiction, arbitration in the context of intellectual property disputes. IPRs will normally be granted by individual states and, therefore, disputes can quickly become an international matter. Depending on whether the intellectual property law is common law or civil law, it will influence which intellectual property rights can be arbitrated. In most jurisdictions, categories such as patents, copyright, trade secrets, trademarks, and domain names will be recognised universally. The Convention Establishing the World Intellectual Property Organisation highlights in article 2(viii) a general definition of intellectual property rights:
Trademarks, service marks and commercial titles
Protection against unfair conduct
Rights stemming from intellectual production from industrial, scientific, literary, or artistic works
Infringements relating to these intellectual property rights can result in disputes and subsequent litigation and arbitration. However, the arbitration of the validity of intellectual property rights can either be not arbitrable or very limited. This is due to fact that the validity of intellectual property will often be processed by the relevant country’s intellectual property law procedures and will be subject to that jurisdiction.
In addition, disputes over intellectual property will be subject to what was negotiated within the commercial agreement, as a choice of law and jurisdiction should be outlined within the governing law clause.
Clear differences from civil law and common law are the following:
Civil law systems expressly recognise the full arbitrability of issues such as the common law exception of the validity of intellectual property rights.
Civil law systems will accept the inter partes awards or incidental decisions for issues of patent validity.
IPR and NDAs
The Non-Disclosure Agreement or ‘NDA’ is a legal agreement between parties that stipulates a promise not to disclose certain information discussed within the context of the agreement. They are typically used when two or more parties engage in a commercial agreement.
The purpose of a NDA is to protect business plans, confidential information, or trade secrets that were shared during negotiation between parties. In the context of intellectual property rights, NDAs are commonly used to prevent the infringement of valuable intellectual property rights and will allow for parties to share intellectual property while protecting themselves from possible breaches. Common practice for NDAs will typically stipulate that any breaches of confidential information or trade secrets may result in litigation and damages. So, review NDAs carefully.
Please note that this document is not legal advice. Legly, and its representatives, are not responsible for the content herein or the suitability for your company’s business. We recommend you use this in conjunction with legal advice and not as a substitute.